UK's Financial Services Authority and the Reserve Bank of India mutually assist and exchange information in supervision of banks operating in both the countries.
This has come at a time when UK-based HSBC's staff in India have come under the scanner for deficiencies in their role as "offshore reviewers" of the global banking giant's compliance to safety mechanism against money laundering and terrorist financing activities.
A probe conducted by the US Senate's Permanent Sub- Committee on Investigations found that HSBC had exposed the US and other countries to numerous risks emanating from drug cartels, terrorist financing and money laundering activities.
An MoU between RBI and the FSA provides for a "formal basis for cooperation in the area of banking supervision, including for the exchange of supervisory information".
Officials said that the MoU would help India seek material information and help from the UK in cases like HSBC, as also on other issues relating to British banks operating in India.
Among others, the new agreement is aimed at helping RBI and FSA to ensure that operations of the cross-border banking establishments in the two countries are "prudently conducted" and the head offices and parent entities of such banks exercise adequate and effective control over the operations of their cross-border branches and subsidiaries.
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